Getting capital for your start-up is a task. While most Entrepreneurs are keen to set a meeting with a Venture Capital firm or maybe, get VC funding, there are some basics you should know while you prepare for the meeting.
- UNDERSTAND THE SECTOR IN WHICH A VC INVESTS: Every, VC firm has its sector in which they prefer investing. Hence, before you start approaching, list down the names of VC’s who would be keen to invest in your sector. There are very few firms in India, which are sector agnostic. To avoid dejection, it is better to get in touch with the right VC’s/ Investors.
- KNOW YOUR BUSINESS, MORE THAN YOU THINK YOU KNOW: Investors or VC’s have no dearth of good start-ups approaching them for funding. You got be really exceptional, for an Investor to find you worth investing his time or money. Also, an Investor has assessed many start-ups and understands the generic as well as specific markets. Investors are always looking for reasons to say No, so that even if you doing very well on 9 metrics, but are lagging behind on the 10th, they will reject you. Don’t give them a chance to say No!
- DON’T JUST SEND GENERIC BUSINESS PITCHES: Business Pitch is a communication tool. Hence, you cannot send one business pitch to every investor. If you know, that, a particular investor is really important for you, write a business pitch which will encourage him to meet you. Understand their past investments, requirements etc. and show them that you have everything they look for. Sending one pitch to every investor, without customizing it, is a straight NO, NO!
- BE ON POINT WITH DUE DILIGENCES: Most of the investment deals get stuck at the due-diligence level. It takes months of efforts to get a term-sheet from an Investor. The Due-Diligence for start-ups begin after the term sheet is signed. It is here where the investor gets a view of the internal matters of the start-up. If you have a history of not complying with Government Regulations, the Investor is going to have a reason to question your sincerity. Many times, this leads to a back out. Hence, get the best legal advice for start-ups, before you plan to raise funds.
- LEARN FROM THE REJECTIONS: Rejections are the most common while you working on start-up funding. If an investor rejects you, feel free to ask them for a review. Their inputs will certainly help you, in building your business pitch and business in the long run. Remember to be polite and not get defensive. When an investor rejects a pitch, he is offering valuable feedback. It’s up to the entrepreneur to make the most of this!
We hope these tips will help you, while you raise funds for your start-up. Remember, to not get demoralized and keep working on investor inputs to perfect your product, pitch and business.